Brokers to give daily margin info to clients
Stock broking firms will have to notify clients about their (the client’s) daily margin positions from April 1, according to a Securities and Exchange Board of India (Sebi) directive. The move follows a spate of complaints from investors that brokers have been liquidating their positions citing insufficient margins, even though their margin accounts had enough funds.The other common complaint is that investors are not aware of the quantum of margin money that had to be deposited to replenish the account. Such complaints could soon become a thing of the past once the new rule is implemented.
During a free fall — as was seen during January 2008 and in May 2006 — brokers promptly square off clients’ positions, at times, it is claimed, not giving them adequate notice. Often, it is alleged, brokers use the funds of their least-preferred clients to meet the margin commitments of their high-volume customers.
“We believe that the digital contract note has to include the margin position from April 1 onwards,” says Angel Broking’s executive director Amit Majumdar. “The software programme needs to be changed so that it goes back to the ledger to pick up the margin position. This might slow down the process resulting in a printing delay,” adds Mr Majumdar who heads the operations, finance and alternate business of the broking outfit.
The market regulator is of the view that if investors are informed about their margin positions on a daily basis, it would become easier for them to replenish the dwindling margin.
“If informed on a daily basis, investors can see when their margin positions are approaching dangerous levels,” said a source. This would minimise instances of brokerages liquidating client positions for want of margins, he added. This will help investors who trade frequently in the derivatives and/or the cash market and who operate by keeping open positions.
However, there seems to be a slight confusion as to how brokerages will inform their clients about their margin position. While some say the additional information would be made a part of the digital contract note, there are others who say that a separate note (about margin position) would be mailed to all the clients everyday.
Thanks to The Economic Times
During a free fall — as was seen during January 2008 and in May 2006 — brokers promptly square off clients’ positions, at times, it is claimed, not giving them adequate notice. Often, it is alleged, brokers use the funds of their least-preferred clients to meet the margin commitments of their high-volume customers.
“We believe that the digital contract note has to include the margin position from April 1 onwards,” says Angel Broking’s executive director Amit Majumdar. “The software programme needs to be changed so that it goes back to the ledger to pick up the margin position. This might slow down the process resulting in a printing delay,” adds Mr Majumdar who heads the operations, finance and alternate business of the broking outfit.
Brokers will need to disclose this daily
Client code and name, trade day (T)
Total margin deposit up to day T-1 (including break-up in cash, fixed deposit, bank guarantee and securities)
Margin utilized up to the end of day T-1
Margin deposit on day T (including the break-up information)
Margin adjustments for day T
Margin status (balance with the member/due from the client) at the end of day.
The market regulator is of the view that if investors are informed about their margin positions on a daily basis, it would become easier for them to replenish the dwindling margin.
“If informed on a daily basis, investors can see when their margin positions are approaching dangerous levels,” said a source. This would minimise instances of brokerages liquidating client positions for want of margins, he added. This will help investors who trade frequently in the derivatives and/or the cash market and who operate by keeping open positions.
However, there seems to be a slight confusion as to how brokerages will inform their clients about their margin position. While some say the additional information would be made a part of the digital contract note, there are others who say that a separate note (about margin position) would be mailed to all the clients everyday.
Thanks to The Economic Times
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